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REPRINTED FJLOM THE ANNAITST 
OF JANUARY 8^,1913 




BUILDING 
CONTRACTS 
AWARDED 



t 



(as reported by the F. W. Dodge Co.) 

27 Northeastern States 

Average monthly awards in thousands of sq. ft. 

(000 omitted) 

Type of 
Construction 1919 1920 1921 1922 

Business 9,240 6,870 5,437 8,138 

Industrial 12,772 10,652 2,981 5,577 

Residential .....20,157 11,460 17,047 25,949 

Educational 1,915 2,190 3,382 4,751 

Hospitals and institutions 368 523 890 1,032 

Public buildings 172 236 252 290 

•Public Works 654 534 704 906 

Social and recreational .. . 1,265 1,030 1,456 1,626 

Religious and memorial.. 444 422 767 1,134 

t Grand total 46,683 33,491 32,267 44,940 

* Given in number of projects, 

t Grand total includes military and naval buildings and miscel- 
laneous in addition to the groups listed. 






CEMENT INDUSTRY IS 
OPTIMISTIC FOR 1923 



By JOHN R. MORRON 

President The Atlas Portland Cement Company 



w 



ITH confident faith in the integrity, ability and 
constructive genius of the American people to 
meet the economic and political problems ur- 
gently pressing for solution and after careful analysis of 
reliable trade indices, I cannot look forward to 1923 with 
other than optimism for those engaged in the manufac- 
ture and sale of cement. This year has been one of 
gratifying expansion in demand, but a year of many 
harassments and unusual obstacles. 

The fourth largest consumer of coal in the United 
States and the largest user of pulverized coal, the indus- 
try, which used 7,400,000 tons in 1921, is very dependent 
upon coal supply for production and the cost of manufac- 
ture. An increase of $1 per ton for coal increases the cost 
of manufacture of cement 10c per barrel. For a time 
last Summer the cement mills were paying more per ton 
for coal than they received for their product. Despite 
the difficulties of coal supply and railroad car shortage, 
and embargoes which seriously hindered shipments, the 
industry has closed its banner year in volume with total 
shipments of more than 115,000,000 barrels. This is 
an increase of 20 per cent, over 1920, which was the 
former highest year's tonnage. This expansion is a 
growth that has been steady and (except for the war 



1 



CHART I. 




period) continuous for the last twenty years, as Chart I 
shows. The beginning of the almost perpendicular rise 
which commenced about 1900 was simultaneous with the 
general adoption of the rotary kiln, which made for per- 
fection of quality and economy of manufacture. 

The last year's demand is not difficult of discernment. 
When those directing our energies in the war decided that 
construction and reconstruction were non-essentials, there 
began a damming-up process of delayed structural re- 
quirements that burst into activity so soon as restraint was 
removed. The housing problem became acute to the 
point of suffering until private home and home sheltering 
structures were built in feverish haste. There are those 
who contend that this crisis has been met and that the 
peak of home building has been passed. Rentals and 
building permits do not confirm this, and, until the hieh 



1 



rentals are materially reduced, capital will continue to 
flow into home and apartment building. The ratio be- 
tween residential and other forms of construction may 
change, but, as home building slackens, industrial and 
commercial construction will increase. 

The accompanying table gives for 19 19 to 1922 the 
average monthly amount of contracts awarded for con- 
struction. After the great building boom of 19 19 there 
was a considerable falling off in 1920, which was not 
reflected in cement shipments until 1921. That year was 
still slightly lower in square feet of building construction. 
The amount of contracts awarded for construction for 
the first eleven months of 1922 was 45 per cent, greater 
than the first eleven months of 192 1 and 23 P er cent, 
greater than the whole year of 192 1. It would seem rea- 
sonable to presume that this extraordinary movement is 
not temporary but a reflection of an underbuilt condition 
of such extent that construction must proceed at this rate 
for some time to come in order to bring the nation to a 
point approaching normal. 

It is not alone from structural building that the demand 
for cement will continue but also from those other fields 
of enterprise in which cement forms an integral part. 
Years ago kerosene was hailed as a beneficent by-product 
of crude oil. Today the thousands of extracts of crude 
oil, especially gasoline, have made the basic product a 
world necessity. So it has been with cement. The very 
foundation of the world's constructive development rests 
upon the permanence, safety and economy of that mate- 
rial. Just stop for a moment to think how varied are its 
uses — home, office, farm, railroads, canals, highways, 
sidewalks, viaducts, dams for irrigation and power, 
bridges, tunnels, subways, army and navy defense, sewers, 



pavements, tiles and pipes, besides the thousands of 
smaller utilities and the artistic decorative beauty obtain- 
able. It is from this ever-expanding field of usefulness 
that the great demand will arise and, unless all signs fail, 
the year 1923 will outstrip its predecessors in shipments. 
Yet the industry has more than kept ahead of all demands 
upon it and will continue to do so. The present produc- 
tion capacity of all cement mills is between 140,000,000 
and 150,000,000 barrels annually, thus leaving a large 
margin between consumption and capacity. 

Everywhere is evidence of national, municipal and 
industrial reconstruction and extension in which cement 
will be necessary. Only recently announcement was made 
of the proposed construction of a dam to harness the 
power of the river above Quebec and furnish 1,200,000 
horsepower for light and power. School structures are 
still inadequate to meet the demands for the rudimentary 
education of our growing population. Cement highways 
have proved their merit and highway officials are plan- 
ning increased mileage of that construction. The mileage 
of cement roads constructed annually has increased from 
2,365 miles in 1919 to about 7,000 miles in 1922. At the 
end of this year there will be an uncompleted yardage 
under contract of about 35,000,000 square yards, equal to 
about 3,500 miles of an 18-foot roadway — more than all 
the concrete roads in the United States in 19 17. The rail- 
transportation problem has become one of national wel- 
fare. The need of construction of maintenance and exten- 
sions, as well as lack of necessary terminal facilities, has 
reached a point where much work must soon be done. A 
transportation breakdown is unthinkable. New York and 
other cities must have new subways. State and municipal 
works for the protection of the health and welfare of the 



public, and to provide it with those conveniences which 
modern civilization demand, are pressing for construc- 
tion. Huge enterprises for water power and irrigation 
await the proper opportunity and there is before Con- 
gress the suggestion of appropriations for Federal office 
buildings throughout the land. Institutional buildings, 
hospitals, social, religious and recreational projects are 
contemplated. Modern forms of building are required 
to replace decayed and old-fashioned, unsafe structures. 
On every hand the signs of the time point toward cement 
with every increasing demand and indicate that the "Era 
of Cement" has arrived. 

Both the manufacturer and the public have been incon- 
venienced heretofore by the seasonal character of cement 
construction. As storage of cement on account of its 
nature requires extremely well-built and expensive storage 
houses, distributers have provided themselves with only 
limited storage facilities. This results in a heavy con- 
centration of cement shipments in the Summer months 
when outdoor work is more easily carried on. With the 
adverse traffic conditions that the country has suffered 
from in the last two years it has been extremely difficult 
and, at times impossible, to move the necessary tonnage 
to meet this Summer demand. The remedy for this con- 
gestion is a wider spread of the construction period, with 
earlier Spring and later Fall and Winter work and a more 
even distribution of purchases by dealers. The educa- 
tional work of the Portland Cement Association in con- 
nection with safe methods of carrying on Winter con- 
struction in cement will result very advantageously to the 
public, in that the Summer peak of shipments may be kept 
from rising higher, thus avoiding higher prices and inabil- 



ity to meet the Summer demand because of the limitations 
of transportation. 

The public, through lack of understanding of the dif- 
ficult and costly process of manufacture, has assumed that 
cement is only pulverized rock. The process from the 
time that the raw material is blasted out of the solid 
ledge rock to the time that it is delivered to the consumer, 
an accurately proportioned and dependable article, is a 
complicated and expensive one. It involves eight fine 
grindings of cement rock, limestone, coal and the incin- 
erated combination. Two of these grindings, one of the 
raw materials and the other of the incinerated combina- 
tion of them, is to such a fineness that the resulting 
powder may be passed through a screen of greater fine- 
ness than silk dress goods. The incineration of the raw 
material takes place at a temperature of about 3,000 de- 
grees Fahrenheit, in a slowly revolving fire-brick-lined kiln 
from 150 to 240 feet long. Throughout continuous tests 

to insure uniformity of product and dependability are 
made. 

Much of the result achieved in developing the cement 
industry and conducting scientific education and inspection 
has been due to the Portland Cement Association. 
Ihrough this organization most of the cement companies 
cooperate for the conduct of research and experiments, 
maintaining laboratories to investigate new uses and to 
determine the best methods for cement and concrete con- 
struction. The findings are in each instance made public. 
For the purpose of spreading the results of this research 
and to educate the consumer the association maintains 
twenty-four offices throughout the country, employing 200 
experienced engineers. The work includes direct inspec- 
tion of construction in order to make sure that the con- 



crete roads and street pavements for which the public's 
money is spent are properly constructed in accordance 
with the specifications and the best concrete practice. The 
outstanding example of this cooperative educational work 
is the rapid growth of the appreciation in the public's 
mind of the merits of the concrete road. In 19 14 
5,000,000 barrels of cement were used in this type of 
construction, in 1921 22,000,000 barrels, and in 1922 the 
total will be more than 25,000,000 barrels. The great 
value of the educational work of the Portland Cement 
Association was felt particularly during the two or three 
years immediately following the war, when most of our 
country's industries suffered loss and disastrous depres- 
sion, while the production and shipments of cement con- 
tinued in rather satisfactory volume. 

So much misstatement has been forced upon public 
attention that it is but fair to point out some of the more 
glaring ones. When one reads or is informed that cement 
is selling for $2.50 per barrel, it should not be accepted 
as the income received by the manufacturer. From the 
trade quotation must be deducted freight rate, bags and 
discount. With freight of say, 38 cents, four bags return- 
able at 10 cents each, and a discount of 10 cents, the 
manufacturer's price is reduced to $1.62 per barrel, or 
$8.10 per ton. The bags are returnable to the manufac- 
turer at the price included in the quotation, at the present 
time 10 cents each, at which price they disappear from the 
trade through wear and tear and must be replaced at a 
I price of 19 cents per bag. These bag losses amount in the 

I aggregate to very large sums of money (more than 

I $3,000,000 in 192 1 for nineteen Eastern companies). 

I According to the reports of the United States Geo- 



logical Survey the average prices received by the cement 
mills in the Lehigh Valley were: 

$1.64 per barrel in 1919, or $8.20 per ton. 
$1.91 per barrel in 1920, or $9.55 per ton. 
$178 per barrel in 1921, or $8.90 per ton. 

Thus, it is seen, that the highest average price was but 
$9.55 per ton during the peak prices of 1920, and that 
price represents the highest average price received by the 



■ — W I 



CHART II 

PtPICtKT 



£50 



100 



»30 



"00 



30 




1921. 



— — ■ 



Price Index of Portland Cement Compared With That of All Building 

Data for United States Government Reports. 

Lehigh Valley Mills for the last decade. Chart II shows 
the index price of cement from 19 13 to date, compared 
with the index price of other building materials for the 
same period, all of the data being taken from Govern- 
ment reports. The comparison acquits the cement in- 
dustry of the charge of profiteering, and shows how little 
the price of cement followed the peak prices of other 
building materials. 

A few individuals may have speculated in cement, but 
this speculation cannot assume any great proportions 



> 



on account of the small storage capacity available to dis- 
tributors and the policies pursued by most of the com- 
panies in this respect. It has been misstated that the 
cement companies limit the amount a purchaser may buy. 
A buyer may purchase all of the cement that he wishes 
at the current price, provided he will accept delivery at 
once or within a very short period. In general, cement 
companies will not make a contract for the future de- 
livery of cement at the price then prevailing. A notable 
exception is made to this policy in order to stabilize build- 
ing cost; in that, a prospective builder or contractor 
may know when he starts a project what his cement will 
cost him throughout the life of that project; that is, a 
contract may be made at the present current price for 
future delivery for use on a specific piece of work. This 
is done with the expectation and in accordance with the 
terms of the contract that the cement so contracted for 
shall be used only in that work, so that none of it may 
get into speculative hands to the detriment of the public. 



chart m. 



*o 






RETURN- TAXABLE INCOME 
&5 J?EPOf?TE£> TO GOl/£f?/VMEMT — 
I ESS FEDERAL TAX 





1913 



191+ 



1915 



•9te 



?9i7 



191ft 



ipiy 



l££0 



IpZI 



Percentage of Return on Invested Capital, as Reported to the Government bj 

Nineteen Eastern Cement Companies- 



Unfortunately, abuses have entered into these contracts 
for specific work. Frequently purchasers, either through 
lack of information of the exact requirements of the 
prospective work or through an anxiety to be amply and 
safely covered on deliveries, sometimes make these con- 
tracts for an amount considerably in excess of the re- 
quirements of the work and even duplicate such contracts 
with more than one cement company. This introduces 
an element of uncertainty for the cement companies in 
that, with the multiplication of a great number of such 
cases, a company will sometimes consider that its product, 
or a large proportion of it has been sold, when, in fact, 
a large proportion of the amount of cement on contract 
for specific work will not be called for. If however, there 
has been an increase in the cost of manufacture, with a 
resulting increase in price, purchasers holding these over- 
estimated or duplicate contracts at the former low price 
will, in many instances, order out the cement for other 
uses than the work specified and in violation of the terms 
of the contract. This means of speculation is guarded 
against as carefully as possible by the individual com- 
panies, but efforts are materially handicapped by the 
inability of the cement companies under Government re- 
strictions to cooperate by means of a comparison of 
cement contracts filed with the several companies for 
the purpose of detecting duplicates. 

In the construction of a modern home costing from 
$8,000 to $10,000, the amount of cement necessary, in- 
cluding the building of sidewalks costs from 1 ]/ 2 per cent, 
to 2 per cent, of the total. In figures this amounts to 
from $120 to $200 for the cement used in the construc- 
tion of such homes. A variation in the price of cement 
of 25 cents per barrel in the case of such a house is 
equivalent to only a day's pay to a plasterer or brick- 



lay ginable that construction of any home 

wo >ned on account of a consideration so 

litt total cost? 

ill answer to the charge of undeserved 
pre st accurate basis from which earnings 

coui *;ed is the reported income tax returns, 

and ti. *s to the Government of nineteen cement 

companies operating in the Northeastern States from 
19 1 2 to 1921 inclusive have been used for the lines 
shown. For the best year, 19 19, the earnings were 6.7 
per cent, before dividends on stock were paid. In 1920, 
a year in which profiteering was at its height, these nine- 
teen cement companies earned 4 per cent, on invested 
capital, and certainly that shows no reflection of profiteer- 
ing. When one considers the enormous amount of capital 
required in this industry ($2.50 for each barrel of annual 

9 output) the expensive operation through which the 

quarried rock must pass before it can be sold as a 
standard quality to the consumer, the high labor and 
coal costs, the exacting specifications, and the high quality 
expected — the wonder is that cement is the cheapest of 
all manufactured products. 

I believe in the cement industry. I believe in its future, 
and I believe in its honest administration and its efficient 
management for the welfare of the nation and the in- 
dividual. Its growth has not come from the rubbing of 
an Aladdin's Lamp, but has resulted from energy, fore- 
sight and scientific research. It renders service to in- 
crease public security, health and prosperity. It might be 
well termed a "public service institution/ 1 I believe the 

[ industry realizes and accepts its responsibility to provide 

cement of the highest quality at the lowest price as a 
duty toward national advancement, and that the industry 
has been and will be conducted for the best interest of all. 



Unfortunately, abuses have entered into these contracts 
for specific work. Frequently purchasers, either through 
lack of information of the exact requirements of the 
prospective work or through an anxiety to be amply and 
safely covered on deliveries, sometimes make these con- 
tracts for an amount considerably in excess of the re- 
quirements of the w r ork and even duplicate such contracts 
with more than one cement company. This introduces 
an element of uncertainty for the cement companies in 
that, with the multiplication of a great number of such 
cases, a company will sometimes consider that its product, 
or a large proportion of it has been sold, when, in fact, 
a large proportion of the amount of cement on contract 
for specific work will not be called for. If however, there 
has been an increase in the cost of manufacture, with a 
resulting increase in price, purchasers holding these over- 
estimated or duplicate contracts at the former low price 
will, in many instances, order out the cement for other 
uses than the work specified and in violation of the terms 
of the contract. This means of speculation is guarded 
against as carefully as possible by the individual com- 
panies, but efforts are materially handicapped by the 
inability of the cement companies under Government re- 
strictions to cooperate by means of a comparison of 
cement contracts filed with the several companies for 
the purpose of detecting duplicates. 

In the construction of a modern home costing from 
$8,000 to $10,000, the amount of cement necessary, in- 
cluding the building of sidewalks costs from 1 1 / 2 per cent. 
to 2 per cent, of the total. In figures this amounts to 
from $120 to $200 for the cement used in the construc- 
tion of such homes. A variation in the price of cement 
of 25 cents per barrel in the case of such a house is 
equivalent to only a day's pay to a plasterer or brick- 



layer. Is it imaginable that construction of any home 
would be abandoned on account of a consideration so 
little affecting its total cost? 

Chart III is full answer to the charge of undeserved 
profits. The most accurate basis from which earnings 
could be calculated is the reported income tax returns, 
and the reports to the Government of nineteen cement 
companies operating in the Northeastern States from 
1912 to 1921 inclusive have been used for the lines 
shown. For the best year, 1919, the earnings were 6.7 
per cent, before dividends on stock were paid. In 1920, 
a year in which profiteering was at its height, these nine- 
teen cement companies earned 4 per cent, on invested 
capital, and certainly that shows no reflection of profiteer- 
ing. When one considers the enormous amount of capital 
required in this industry ($2.50 for each barrel of annual 
> output) the expensive operation through which the 

quarried rock must pass before it can be sold as a 
standard quality to the consumer, the high labor and 
coal costs, the exacting specifications, and the high quality 
expected — the wonder is that cement is the cheapest of 
all manufactured products. 

I believe in the cement industry. I believe in its future, 
and I believe in its honest administration and its efficient 
management for the welfare of the nation and the in- 
dividual. Its growth has not come from the rubbing of 
an Aladdin's Lamp, but has resulted from energy, fore- 
sight and scientific research. It renders service to in- 
crease public security, health and prosperity. It might be 
well termed a "public service institution." I believe the 
industry realizes and accepts its responsibility to provide 
I cement of the highest quality at the lowest price as a 

[ duty toward national advancement, and that the industry 

has been and will be conducted for the best interest of all.